Research on the Relationship between Investor Sentiment and Stock Price

Yi-ming DU, Rui DING, Yi-lin ZHANG, Ting ZHANG, Tao ZHOU

Abstract


As one of the main contents of behavioral finance, investor sentiment has become a research hotspot in recent years. This paper takes the CSI300 index of China as the observation object, selects five emotional monthly time series data including lag one period from 2016 to 2020. The method of principal component analysis will be used to reduce the dimension of 10 groups of data. After eliminating the macroeconomic factors, the dimension reduction results are analyzed by the second principal component analysis to obtain the comprehensive index of emotion. Furthermore, a Vector Auto Regressive model (VAR) is established to investigate the relationship between ISIO and CSI300 of the stock market. The results show that investor sentiment and stock price interact with each other, but only in the short term. With more and more sufficient market information known, the effect is becoming insignificant.

Keywords


Investor Sentiment, Principal Component Analysis, VAR Model


DOI
10.12783/dtem/mebit2021/35642

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